Indexed Annuities Market Growing and Changing

Indexed annuities have been growing at a much faster rate than variable annuities and fixed annuities in the past 5-10 years.  The Life Health Pro article, “New players enter indexed annuity space” by Maria Wood, says that the compound annual growth rate for indexed annuities was 9.3% from 2005-2010.  Variable annuities grew 1.9% and fixed annuities grew 2% in the same time frame.  These statistics were taken from Conning Research & Consulting’s indexed annuity study.  Indexed annuities are likely to continue their growth pattern because of great opportunities, but they also have to face some challenges coming their way.

A new trend looks to be occurring that signifies a return of the “captive agent,” as opposed to using more distribution networks.  Allianz Life is the first company signaling that return with their fixed equity indexed annuity product.  Their “virtually tied agents” have to submit to a suitability review from Allianz.  While this strategy is working for Allianz so far, the use of virtually tied agents and distributor-designed products does hinder competition.  These are some of the challenges to which indexed annuity providers seek solutions.

Big names in the variable annuity market have started entering the indexed annuity territory and that trend is likely to continue.  The entrance of Hartford and Genworth offers a bit of a threat to those currently selling indexed annuities.  Some advantages variable annuity providers bring include distribution networks that have already been established and experience with hedging for living benefits and index linking returns.  Rule 151A’s elimination made it easier for these variable annuity players to enter the indexed annuity market.

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